How we rate an industrial sector?

By Anonymous

Created 12/31/2009 - 14:05

The project was conceived in the mid- 1990s when Centre for Science and Environment (CSE) director Anil Agarwal visited the United States. He read about the work of a non-governmental organisation (NGO) called the Council of Economic Priorities (CEP), which rated the social and environmental performance of industries in the US.

CEP then provided this information to those investors who wanted to invest only in environmentally and socially responsible businesses. Anil Agarwal was pleasantly surprised to learn that despite no government and legal support, these ratings were pushing industry towards more socially and environmentally conscious business practices.

Once this data is available, it is easy to set up some benchmarks and rate industries accordingly. However, it is not possible for NGOs in India to adopt the US strategy. In India, the Central Government does not maintain such a centralised database and even the data that it has on companies, is not easily available to the public. In fact, different state governments have different attitudes towards public accessibility.

Moreover, within the environmental community, there is very little credibility in the data being supplied to the government unlike the credibility enjoyed by USEPA’s Toxic Release Inventory.

GRP, therefore, relies heavily on voluntary disclosure by companies and then puts the information supplied by companies through rigorous technical scrutiny. Voluntary disclosure of environmental performance is no longer an exceptional exercise. On the contrary, it is becoming a hallmark of good business practice.

Methodology and the Rating Process

Aspects

• Data collection and dissemination:The project involves comprehensive data collection on all aspects of the Indian industry. This is made available to the public through publications, website, etc.

• Environmental performance analysis and rating: Sector-specific rating criteria are developed to benchmark the companies for their environmental performance.

• Education and awareness rising:The project includes an environmental awareness programme with special emphasis on management graduates, environmental managers and government officials. Training workshops covering media, regulatory authorities, industry and financial institutions are also a part of this programme.

• Advocacy:After every rating, CSE recognises outstanding environmental performers and highlights companies with poor environmental performance as well. It also plans to push for the introduction of fiscal and environmental policy to support sustainable development.

The rating steps

• A detailed sector study is prepared. This study contains all the environmental issues of the sector and also the interface of environmental issues with trade, commerce and policy issues.

•Sector-specific questionnaire and questionnaire about corporate environmental policies and management systems is prepared and sent to the companies.

•Simultaneously, secondary information collection is initiated which includes interviews with plant managers, local communities, NGOs and media, collection of information from state pollution control boards, etc.

•Based on the company’s response and secondary data collected, an environmental profile is prepared for the company.

•The profile is scrutinised by the Technical Advisory Panel and cleared.

•The draft profile is sent to the company for review.

•Company’s feedback is received and one to one meeting is organised to discuss disagreements and for furnishing evidence of claims made by the company.

• TAP reviews the comments of the company and finalises the information. Based on the final information, internal rating is done as per the rating scheme prepared for the sector.

•Finalisation of ratings for the sector by TAP.

•Project Advisory Panel meeting is organised to review and clear the rating.

•Rating is released at a high profile public function.

Monitoring the journey from cradle to grave

For assessing actual environmental performance, CSE uses the broader Life Cycle Analysis (LCA) instead of the more limited Environmental Impact Assessment or environment audit made by official agencies. This is a highly technical process and has no precedence in India. So, the project is not only building a database of India’s industrial sectors, but also setting-up the process and methodology for environmental benchmarking of the industrial sector and companies within it.

The LCA approach:

• The environmental impact during the sourcing of raw materials,

•The environmental impact at the production stage during processing of raw material into final product,

•The environmental impact during product use,

•The environmental impact arising out of the disposal of the products.

A combination of all these factors gives the rating a holistic perspective and brings it in tune with the ground reality. The uniqueness of GRP is that this is the first time anywhere in the developing world that the environmental performance rating of industrial firms is being undertaken by an NGO and that information of the environmental performance of companies is being made available to public. In today’s industry-environment interface globally, where internal management tools like ISO 14001, EMAS etc. are being favoured by the companies, GRP goes a step beyond the claims of internal improvements made and actually verifies the claim.

ISO 14001 is an internal management tool for improving the environmental status of an industrial firm and is restricted to employees working in the industries only.

GRP is a combination of both internal management tools like ISO 14001 and public participation in environmental affairs, which is the corner stone of a democratic society.

Major criteria

As explained above, GRP uses the life-cycle analysis to assess the environmental performance of the companies. The major criteria and their respective weightages also follow the LCA, though certain latitude is included to address the Indian priorities.

6.Criteria for community and regulatory perception and compliance status: Compliance with pollution control board regulations and perception of PCB officials.

•Perception of local community

•Perception of local NGOs and media

•Perception of CSE’s green inspector

Weightages: The weightages are assigned to the various criteria based on their environmental impacts during the entire life cycle. Thus, though the broader criteria remain the same, the weightages vary substantially between sectors.

For example, in the case of the pulp and paper industry, the highest weightages were given to the raw material procurement and production phase. However, In the case of automobile industry, the highest weightages were assigned to the product use phase. Thus, weightages are assigned on the basis of inherent characteristics of the industrial sectors.

The scoring scale: The scoring scale follows GRP’s aim to push companies to perform far better than what is currently required by the regulations.

Whenever a regulatory standard exists it will be taken as the lowest benchmark. In cases where no regulatory standard exists, the Indian average performance is estimated and taken as the lowest benchmark.

Comparative score:In this case, the average of all companies is taken and given two marks. The company with the best performance gets 8 and below the average performance gets zero. Between 2 and 8, a linear scale is used.

The Global Best Practice is given 8 marks out of a maximum score of 10 marks because even the Global Best Practice is not the theoretical best. Thus, even the best companies in the world still have scope to go forward. The theoretical best practice is given 10 marks, as we would like to drive technology to achieve better environmental performance.

Provision of supporting documents for substantiating the claims made by a company are evaluated as the multiplication factor for the question. Thus, for a company that has provided the supporting document, the score obtained under that question will be multiplied by a multiplication factor of one. If the company fails to do so, the multiplication factor used will be zero.

In questions where trends are being used as the performance indicator, the following scoring scale will be used:

•Continuous or overall deterioration of environmental performance or consistently at very poor level of environment performance:0

•Consistently average level of environmental performance:5

•Overall improving trend in environmental performance:7.5

•Continuous improvement in environmental performance:10

•Consistently at high level of environment performance:10

Dealing with data discrepancy: The rating scheme is vulnerable to data discrepancy in many ways. The data supplied by the company on certain parameters may not tally with the data supplied by external agencies. To overcome this weakness, a generic rating rule has been established:

i.If the information supplied by the company in the environment statement or consent application to PCB is different from information supplied to CSE, then in this case:

This discrepancy will be disregarded as long as the company can justify the data it has given to CSE.In case the company is not able to justify the data, a multiplication factor of 0.95 will be used against the entire rating and the data will be re-evaluated by TAP and the theoretical values of that data will be used in the rating.

ii.If the company provides some data to the project, which is found or considered to be wrong by the technical panel and the company is not able to give adequate justification for the mistake(s), a multiplication factor of 0.95 will be used against the entire rating. If a company has shown signs of and/or admits carelessness during submission of the data, then too this multiplication factor will be used.

iii.If the company has voluntarily disclosed data but has not answered a query, then in this case, 0 marks will be given to the company for the criteria to which the query relates.

iv.If the data supplied by the company at the initial or feedback stage is incorrect, then in this case, a multiplication factor of 0.95 will be used against the entire rating.